ATM at Home

These endeavors began at the bottom of the Great Recession, and one of the first themes (and continues unabated) was that the use of the Home as ATM was driven by the increasing inequality of wealth/income. The right wingnuts are always complaining that growth is poor because poor folks don't spend money, but that's their point, of course. As the 99% continued to lose out on the growth rewards, they were enticed into burning the (un)earned equity in the Old Homestead. Hard numbers were hard to come by, unfortunately, so the schemers could continue to claim that the Great Recession was the result of Democrats' loosening of the mortgage process to allow their poor folk constituents to get into the game.

One Bethany McLean has talked to the perps, and comes up with the hard data.

According to the financial statements of New Century, the huge lender whose bankruptcy in early 2007 helped kick off the financial crisis, cash-out refinancings were 64.2 percent and 59.5 percent of its business in 2003 and 2004; home purchase loans made up only 25 percent to 35 percent for the two years. A New Century executive told Congress that its customers needed to "tap into their home equity to meet other financial needs, such as paying off higher-interest consumer debt, purchasing a car, paying for educational or medical expenses and a host of other personal reasons." I'll always remember seeing a bank ad blowing in the windy, bleak Chicago winter of 2009. "Let your home take you on vacation," it read.

The right wing just can't admit that it's trying to have its cake and eat it too: keep the 99% poor, but keep the economic merry-go-round spinning at breakneck speed. It can't work that way. Li just made it easier to justify, but not intellectually or arithmetically viable. That link is to a Forbes article; amazing.

The bottom line, so to speak, from McLean's research:

According to Jason Thomas, now the director of research at the Carlyle Group, only about a third of subprime mortgages that were turned into mortgage-backed securities between 2000 and 2007 were used to buy homes.

Makes one wonder what's driving the consumer sector these days? The obvious answer is that the Jobs-ian paradigm is at work: consumer oriented companies are all chasing the 20% with money. The 19th century USofA economy worked that way. Back to the future.